LMI for loan extensions?

[zayne]

Hi all,

Just wondering if someone can advise if I refinanced my current loan to 95% of its current value to draw down the equity in it, if I have already paid LMI when I initially took out the loan, do I pay LMI again on the total loan amount or LMI just on the additional funds which were refinanced?

Thanks in advance.

 

[Rolf Latham]

Hiya Zayne

Usually u would just pay PMI on the "new" money

ta
rolf

 

[Kristine..]

Hi zayne

It depends:

Do you mean ‘refinance’ as in close the loan and take out a new loan with another lender, or do you mean increase borrowings with the existing lender?

Two completely different scenarios

If you close the loan then you will be up for break costs and discharge fees, and have to pay establishment fees to the new lender. If you have paid LRF on the existing loan that is with Mortgage Insurer ‘A’, then Mortgage Insurer ‘B’ with the new lender is going to be charging their own fees.

Yes, if you close the loan within a certain period, and provided it is noted in your Loan Documents, then Mortgage Insurer ‘A’ may allow a pro-rata refund of the insurance premium.

If you are increasing borrowings, then you already have paid mortgage insurance on eg $200,000 at 90%LVR. With the increase in property value, you may now be borrowing a further $100,000, bring total loans secured to $300,000 at 90%LVR. Obviously, although the LVR will remain the same, borrowings will increase and you will be charged an adjustment amount for the increase in insurance to cover the new level of risk.

So as with everything, ask your current lender for a quote for adjustment before you undertake what can be a costly and possible unnecessary exercise

Cheers
Kristine

 

[zayne]

I was meaning to extend my loan with my current lender. Thanks guys.

 

[Spectre]

Zayne
Answer is Rolf's then.
That being said some lenders will only let you get cash out to 90%

Others will go to 95+2 with capitalisation

So sometimes that extra 5% comes in pretty handy, and yeah it sometimes means you have to refinance to get it.